Top firms show robust profits, but input costs bite

Corporate India closed October with a slew of quarterly profits that were better than expected, but the figures were dented by higher wage bills, raw material charges and interest payments.

An analysis of the results released by 250 companies out of the list of BSE 500 companies shows that profits rose by 16% for the quarter ended September while revenues were up 17.3% during the quarter.

The profit for the list of companies rose from R45,625 crore in the quarter ended September 2009 to R52,948 crore in the latest quarter. Brokerage analysts were mostly expecting revenues to grow by 20% and profits by 15%.

“The profit growth is slightly better than expected and companies have managed the pressures of higher wage cost, input cost and currency volatility in a better manner,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services. “The revenue growth for the company is below what we expected.”

Experts say that several sectors have come out with strong numbers. According to the data—two wheelers, real estate and refining — witnessed strong revenue and profit growth, while companies in the cement, textile and metal sectors saw their profit growth decline.

On expected lines, refinery, banking, capital goods, pharmaceuticals and fast moving consumer goods also came out with good numbers during the quarter, aided by strong demand. Automobiles turned in record quarterly sales.

The software sector was mixed, with industry leader Tata Consultancy Services showing strong numbers, while Wipro reported a decline in profit growth, hit by a strong rupee that was boosted by high inflows from foreign institutional investors. As a result, dollar earnings were eroded in rupee terms.

While growth in the economy has helped corporate India, it appears that higher input costs resulting from industrial demand, as well as the hangover of high inflation over the past year have resulted in higher costs. Surging ahead